The remains of Red Star Apartments, a senior housing building that was under construction when it was set on fire in June 2012, is now home to squatters and graffiti artists pictured March 11, 2014 in Oakland, Calif.

A fire at a future rest home caught on flames early this morning which damaged the third rail at BART's west oakland station in Oakland, California, halting transbay service on Thursday, June 14, 2012.

Photo: Liz Hafalia, The Chronicle

A fire at a future rest home caught on flames early this morning...

Image 6 of 13

ATF national response team at the site of the burnt structure next to the West Oakland BART station in Oakland, California, on Wednesday, June 20, 2012.

Photo: Liz Hafalia, The Chronicle

ATF national response team at the site of the burnt structure next...

Image 7 of 13

ATF national response team, who have recently gotten clearance to investigate last week's fire next to West Oakland bart station in Oakland, California, investigate the four floor retirement home on Wednesday, June 20, 2012.

Photo: Liz Hafalia, The Chronicle

ATF national response team, who have recently gotten clearance to...

Image 8 of 13

Old furniture sits in the remains of Red Star Apartments, a senior housing building that was under construction when it was set on fire in June 2012, is now home to squatters and graffiti artists pictured March 11, 2014 in Oakland, Calif.

Dozens of discarded spray paint cans litter the floor of the remains of Red Star Apartments, a senior housing building that was under construction when it was set on fire in June 2012, is now home to squatters and graffiti artists pictured March 11, 2014 in Oakland, Calif.

The remains of Red Star Apartments, a senior housing building that was under construction when it was set on fire in June 2012, is now home to squatters and graffiti artists pictured March 11, 2014 in Oakland, Calif.

Light filters through charred wood in the remains of Red Star Apartments, a senior housing building that was under construction when it was set on fire in June 2012, is now home to squatters and graffiti artists pictured March 11, 2014 in Oakland, Calif.

The remains of Red Star Apartments, a senior housing building that was under construction when it was set on fire in June 2012, is now home to squatters and graffiti artists pictured March 11, 2014 in Oakland, Calif.

A bag of celery lays on the floor of the remains of Red Star Apartments, a senior housing building that was under construction when it was set on fire in June 2012, is now home to squatters and graffiti artists pictured March 11, 2014 in Oakland, Calif.

In June 2012, long before this week's huge fire in San Francisco, a somewhat similar blaze ripped through the construction site for a senior housing complex near the West Oakland BART Station, shutting down transit service for 12 hours and causing an estimated $25 million in damages.

Nearly two years later, West Oakland hasn't yet moved past the fire.

The remains of the gutted-out structure are mired in a state of blight, the cleanup stalled by federal and internal investigations, insurance squabbles and uncertainly about the future of the project.

Charred debris mingles with garbage, litter and evidence of squatters. Vandals have spray-painted concrete walls, and a giant puddle has flooded a large space of what was once supposed to be the building's foundation.

There's easy access to the hazardous site - the flimsy wire fences were left open and drooping toward the dead earth - leaving anybody, criminal or otherwise, susceptible to injury.

P.J. Guevarra, a parking attendant at a lot across the street, said he's seen people living on the property. He said the blighted state of the structure is a problem.

"There are a lot of people parking here and they have to see this," Guevarra said. "If you're riding BART, you're going to see it also."

Zachary Wald, chief of staff for City Councilwoman Lynette Gibson McElhaney, said she has been watching the situation since taking office last year. He said the city wants the site developed into something more than what looks like the set of a post-apocalyptic film.

"It's a shame that it's been there for so long," Wald said. "It's a horrible sight and blight."

The original plan for the location was to build a four-story, 119-unit complex for the community's seniors. The $23 million Red Star project was undertaken by a pair of developers, the Michaels Organization and LINC Housing Corp.

The fire, which investigators suspect was set by arsonists, scrambled their plans, said Laura Zaner, a spokeswoman for the Michaels Organization.

Crews couldn't touch the site for a long time due to investigations, she said, and insurance disputes drew out the process even longer. Now, the two developers have agreed that the project is no longer viable for them, and have put the site back on the market for $6.8 million.

"Since this project was first envisioned in 2006, affordable housing finance has changed substantially," Zaner said. "Rebooting the Red Star project using tax credits and other public agency partners could still take up to another year or more to line up the financing."

Zaner added, "If selling the property does not work out, we will consider redeveloping the property ourselves."

In the meantime, she said, the developers are finalizing a contract with a demolition company to clean things up and install a sturdier fence to keep out squatters and vandals, Zaner said.

Wald said the property is still prime real estate due in part to its proximity to BART.

"It still has time to become a successful project," Wald said. "If it sits too long, we will have to make sure the current owner expands its sense of responsibility for the site in terms of its conditions."

Federal authorities have made no arrests in the arson case. Spokeswoman Helen Dunkel of the Bureau of Alcohol, Tobacco, Firearms and Explosives said investigators were on scene for only a few days after the fire before turning the site over to the owners for their internal investigations.

"We've exhausted all of our leads and at this time, the investigation is technically closed," Dunkel said. "Should any new information be developed, we will definitely reopen it."

Chronicle Watch

If you know of something that needs to be improved, the Chronicle Watch team wants to hear from you. E-mail your issue to chroniclewatch@ sfchronicle.com, or reach us on Twitter at@sfchronwatch and www.facebook.com/ sfchronwatch.

What's not working

Issue: The ruins of an under-construction senior housing complex near the West Oakland BART station that was destroyed in a fire two years ago remain an eyesore, with charred debris and garbage all over the property. Vandals have tagged walls with graffiti, and squatters have made themselves at home.

What's been done: The developers who own the site are trying to sell it, but they said they're also finalizing a contract with a demolition company to knock down the top of the blighted structure and install a permanent fence to prevent squatters and vandals.